Nuclear verdicts get the headlines. However, nuclear settlements are the hidden crisis that aren't in the headlines. They are the hidden mass of the "nuclear" iceberg of which only the verdicts are viewable.
A reduction in trials and an increase in risk aversion have combined to create a litigation climate resulting in excessive payments for claims resolutions. These are amounts beyond the true value of the case to avoid the black swan of a nuclear verdict.
Are excessive settlements a real thing? Absolutely, as demonstrated by Sedgwick's data and experience.
Over the last 5 years, verdict severity has increased at an average annual rate of approximately 3.7 percent, roughly in line with inflation. By contrast, settlement severity has increased by more than three times that rate, averaging 12.6 percent annually over the same period.1
The data demonstrates a growing severity for the amounts for which cases are settled as opposed to the values established by verdicts—multiples of the amounts. Trial results track much less growth than voluntary settlements. This is coupled with the decline in cases taken to verdict. Trial trends show a marked change in attitude or, at least, actions. There is a substantial decrease in the number of cases taken to verdict, an incredible contraction in trials over the last 10 years.
Sedgwick, in its 2025 report, stated that its 10-year analysis found that only 1.8 percent of cases went to verdict in the preceding year of 2025. In 2026, that fell even further, to only 1.25 percent of the bodily injury cases having gone to verdict. This was compared to its 2016 peak, when 12 percent of cases went to verdict. That's an incredible drop.
What changed? Was this driven by bad outcomes or horrific trial results? No, just the contrary. Sedgwick's 2025 report noted that, when analyzing verdicts, plaintiffs recovered more than the last offer in only 21.7 percent of the time over the prior 10 years, while the defense came in under the last offer 75.4 percent of the time. So, defendants prevailed (verdict less than offer) more than three times as often as plaintiffs. Trial proved to be the mechanism for success according to the Sedgwick data.
This is consistent with an analysis by the American Trucking Research Institute (ATRI). In ATRI's analysis of trucking cases, approximately 50.3 percent of all settlement cases had awards exceeding $500,000—compared to only 31.5 percent of cases that went to verdict at that level. As with the Sedgwick data, ATRI found defendants paid more in settlements than they paid when juries decided.
So it's not the trial results. Those results, in two different analyses by two different entities, bode well for going to verdict.
Nuclear Avoidance
What drives voluntary payment at a growth rate of three times higher severity than the outcome at trial? It appears that the catalyst of excessive settlements is risk aversion and, more specifically, "nuclear avoidance." The rationale seems to be: Don't get hit with the "Big One."
That was Sedgwick's conclusion in its 2026 report. It stated, "The result is a negotiation environment where defense decision-making appears to be shaped by fear and distorted perceptions of jury behavior rather than empirical outcomes."
Rather than being emboldened, or at least guided, by the trend of trial outcomes, as the ultimate market maker for claims values, settlement amounts are being set by what it takes to defuse a potential detonation of a nuclear verdict. More accurately, avoid the possibility by paying a premium over what the data reflects for verdicts.
That mentality is driving nuclear settlements, or more accurately, what Sedgwick referred to as "nuclear fallout settlements." Settlement amounts are the product of the rumbles of nuclear verdicts. Like in Jurassic Park with the T. rex, reaction to the tremors is generated by the unseen beast.
In its 2026 report, Sedgwick recognized the impact of nuclear verdicts on the "market." On the perceived "value" of claims and cases, regarding nuclear verdicts, it concluded that "these outcomes are reinforcing a perception of risk that drives higher settlement values, even in cases that are unlikely to reach trial." The result is that "Nuclear Verdicts® may be functioning less as isolated events and more as signals that expand perceived settlement ranges earlier in the claim process." In other words, they are events to avoid the "Big One."
This summer, the Pirates were up by two runs on the Phillies late in the game, and the Phillies had the bases loaded. Kyle Schwarber, who already hit two home runs that day, was at bat. Rather than risk a grand slam, the Pirates walked him and forced in a run. It's the same concept: avoiding the "Big One." And, interestingly, the Pirates went on to lose the game.
So here is the situation.
Trial results favor the defendants.
Verdict severity is tracking inflation.
But only a fraction of the cases are going to verdict today than did 10 years ago.
Instead, cases are settling at a premium, with severity increasing at a rate more than three times the rate of verdict severity growth.
The result is a disconnect between the actual market (verdict value) and that which is paid for case resolution. Trials, while producing positive results, are the rare exception and getting even rarer.
Preparing for Nuclear Verdicts and Settlements
Several years ago, I interviewed the vice president of underwriting of a major insurer of trucking companies. I asked about how they underwrite trucking in the nuclear era. How can you price for the potential of a catastrophic verdict? He indicated that they do so with the same approach that insurers underwrite for hurricanes. They know it is always a possibility. They know that sometimes it will happen. They just don't know when or where. They don't know the extent of the damage. But they do believe it will happen.
The Sedgwick numbers present a picture analogous to abstaining from events because of the potential for a hurricane. It is analogous to saying, "We are not going to schedule the (wedding, graduation, other special event, etc.) because there may be a hurricane." The analogy is not a perfect fit.
The avoidance is a product of the potentially existential impact of the nuclear verdict on the defendant. There is a substantial downside that, unlike a hurricane, a nuclear verdict can be ameliorated by settlement. But avoidance is costly given the data on verdict results and severity growth.
It is an axiom of war that generals tend to overestimate their opposition. This is even more prevalent for those faced with a trial. Trials are one-shot and no "do-over," usually. And the human tendency is to enhance the blemishes of the other party's case. The answer is not to avoid, but to prepare. Proceed with an end in sight. Focus on what will improve persuasion. Dictate the pace. Draft the closing argument early. In other words, work to win rather than work the file.
Sedgwick sees a key to be the increase in negotiation skills. Not really, as nothing improves negotiation skills more than a dominant case. Nothing produces a favorable outcome, settlement, or trial more than a winning hand. Increased trial skills are far more valuable than negotiating skills. Success depends on the ability to envision a persuasive presentation and execute it powerfully.
Moreover, abilities are honed by trial experience. Such experience, according to the Sedgwick study, is in a downward spiral. Fewer trials result in less trial experience; the downward spiral continues. That said, not all cases are appropriate for trial. However, sometimes a less-than-desirable case can be forced to trial by the excessive demand of the opponent.
In the words of the rapper Meek Mill, "Scared money don't make no money." Risk aversion is driving increased severity, and trial outcomes are favorable. The "nuclear settlement" trend needs to be reversed.
Opinions expressed in Expert Commentary articles are those of the author and are not necessarily held by the author's employer or IRMI. Expert Commentary articles and other IRMI Online content do not purport to provide legal, accounting, or other professional advice or opinion. If such advice is needed, consult with your attorney, accountant, or other qualified adviser.
Nuclear verdicts get the headlines. However, nuclear settlements are the hidden crisis that aren't in the headlines. They are the hidden mass of the "nuclear" iceberg of which only the verdicts are viewable.
A reduction in trials and an increase in risk aversion have combined to create a litigation climate resulting in excessive payments for claims resolutions. These are amounts beyond the true value of the case to avoid the black swan of a nuclear verdict.
Examine the Statistics
Want proof? Let's look at the mashup of the last two successive annual reports by Sedgwick, entitled Liability Litigation Observations and Trends, Summer 2025, and Liability Litigation Observations and Trends, Summer 2026. Those reports both examine their claims data and histories to develop a perspective on the litigation climate and existing environment.
Are excessive settlements a real thing? Absolutely, as demonstrated by Sedgwick's data and experience.
Over the last 5 years, verdict severity has increased at an average annual rate of approximately 3.7 percent, roughly in line with inflation. By contrast, settlement severity has increased by more than three times that rate, averaging 12.6 percent annually over the same period. 1
The data demonstrates a growing severity for the amounts for which cases are settled as opposed to the values established by verdicts—multiples of the amounts. Trial results track much less growth than voluntary settlements. This is coupled with the decline in cases taken to verdict. Trial trends show a marked change in attitude or, at least, actions. There is a substantial decrease in the number of cases taken to verdict, an incredible contraction in trials over the last 10 years.
Sedgwick, in its 2025 report, stated that its 10-year analysis found that only 1.8 percent of cases went to verdict in the preceding year of 2025. In 2026, that fell even further, to only 1.25 percent of the bodily injury cases having gone to verdict. This was compared to its 2016 peak, when 12 percent of cases went to verdict. That's an incredible drop.
What changed? Was this driven by bad outcomes or horrific trial results? No, just the contrary. Sedgwick's 2025 report noted that, when analyzing verdicts, plaintiffs recovered more than the last offer in only 21.7 percent of the time over the prior 10 years, while the defense came in under the last offer 75.4 percent of the time. So, defendants prevailed (verdict less than offer) more than three times as often as plaintiffs. Trial proved to be the mechanism for success according to the Sedgwick data.
This is consistent with an analysis by the American Trucking Research Institute (ATRI). In ATRI's analysis of trucking cases, approximately 50.3 percent of all settlement cases had awards exceeding $500,000—compared to only 31.5 percent of cases that went to verdict at that level. As with the Sedgwick data, ATRI found defendants paid more in settlements than they paid when juries decided.
So it's not the trial results. Those results, in two different analyses by two different entities, bode well for going to verdict.
Nuclear Avoidance
What drives voluntary payment at a growth rate of three times higher severity than the outcome at trial? It appears that the catalyst of excessive settlements is risk aversion and, more specifically, "nuclear avoidance." The rationale seems to be: Don't get hit with the "Big One."
That was Sedgwick's conclusion in its 2026 report. It stated, "The result is a negotiation environment where defense decision-making appears to be shaped by fear and distorted perceptions of jury behavior rather than empirical outcomes."
Rather than being emboldened, or at least guided, by the trend of trial outcomes, as the ultimate market maker for claims values, settlement amounts are being set by what it takes to defuse a potential detonation of a nuclear verdict. More accurately, avoid the possibility by paying a premium over what the data reflects for verdicts.
That mentality is driving nuclear settlements, or more accurately, what Sedgwick referred to as "nuclear fallout settlements." Settlement amounts are the product of the rumbles of nuclear verdicts. Like in Jurassic Park with the T. rex, reaction to the tremors is generated by the unseen beast.
In its 2026 report, Sedgwick recognized the impact of nuclear verdicts on the "market." On the perceived "value" of claims and cases, regarding nuclear verdicts, it concluded that "these outcomes are reinforcing a perception of risk that drives higher settlement values, even in cases that are unlikely to reach trial." The result is that "Nuclear Verdicts® may be functioning less as isolated events and more as signals that expand perceived settlement ranges earlier in the claim process." In other words, they are events to avoid the "Big One."
This summer, the Pirates were up by two runs on the Phillies late in the game, and the Phillies had the bases loaded. Kyle Schwarber, who already hit two home runs that day, was at bat. Rather than risk a grand slam, the Pirates walked him and forced in a run. It's the same concept: avoiding the "Big One." And, interestingly, the Pirates went on to lose the game.
So here is the situation.
The result is a disconnect between the actual market (verdict value) and that which is paid for case resolution. Trials, while producing positive results, are the rare exception and getting even rarer.
Preparing for Nuclear Verdicts and Settlements
Several years ago, I interviewed the vice president of underwriting of a major insurer of trucking companies. I asked about how they underwrite trucking in the nuclear era. How can you price for the potential of a catastrophic verdict? He indicated that they do so with the same approach that insurers underwrite for hurricanes. They know it is always a possibility. They know that sometimes it will happen. They just don't know when or where. They don't know the extent of the damage. But they do believe it will happen.
The Sedgwick numbers present a picture analogous to abstaining from events because of the potential for a hurricane. It is analogous to saying, "We are not going to schedule the (wedding, graduation, other special event, etc.) because there may be a hurricane." The analogy is not a perfect fit.
The avoidance is a product of the potentially existential impact of the nuclear verdict on the defendant. There is a substantial downside that, unlike a hurricane, a nuclear verdict can be ameliorated by settlement. But avoidance is costly given the data on verdict results and severity growth.
It is an axiom of war that generals tend to overestimate their opposition. This is even more prevalent for those faced with a trial. Trials are one-shot and no "do-over," usually. And the human tendency is to enhance the blemishes of the other party's case. The answer is not to avoid, but to prepare. Proceed with an end in sight. Focus on what will improve persuasion. Dictate the pace. Draft the closing argument early. In other words, work to win rather than work the file.
Sedgwick sees a key to be the increase in negotiation skills. Not really, as nothing improves negotiation skills more than a dominant case. Nothing produces a favorable outcome, settlement, or trial more than a winning hand. Increased trial skills are far more valuable than negotiating skills. Success depends on the ability to envision a persuasive presentation and execute it powerfully.
Moreover, abilities are honed by trial experience. Such experience, according to the Sedgwick study, is in a downward spiral. Fewer trials result in less trial experience; the downward spiral continues. That said, not all cases are appropriate for trial. However, sometimes a less-than-desirable case can be forced to trial by the excessive demand of the opponent.
In the words of the rapper Meek Mill, "Scared money don't make no money." Risk aversion is driving increased severity, and trial outcomes are favorable. The "nuclear settlement" trend needs to be reversed.
Opinions expressed in Expert Commentary articles are those of the author and are not necessarily held by the author's employer or IRMI. Expert Commentary articles and other IRMI Online content do not purport to provide legal, accounting, or other professional advice or opinion. If such advice is needed, consult with your attorney, accountant, or other qualified adviser.